Current-Account Deficit in U.S. Widens to $124.1 Billion

The current-account deficit in the U.S. widened more than forecast in the fourth quarter to $124.1 billion, the biggest in three years.

The gap, the broadest measure of international trade because it includes income payments and government transfers, grew 15 percent from a revised $107.6 billion shortfall in the prior quarter that was smaller than initially estimated, a Commerce Department report showed today in Washington. The median forecast of economists in a Bloomberg News survey called for a $115 billion fourth-quarter deficit.

Imports (USTBIMP) of goods may keep rising as an improving job market underpins consumer spending, and businesses replace outdated equipment. The overall balance of payments deficit is also a reminder of U.S. dependence on foreign investors for funding.

“A widening of the balance just tells you about the relative growth rate of the U.S. compared with other economies,” said Jeremy Lawson, a senior U.S. economist at BNP Paribas in New York. “There’s a fairly good chance that the deficit will widen again because imports are on track to outpace exports.”

The gap for all of 2011 widened to $473.4 billion, or 3.1 percent of gross domestic product, from $470.9 billion a year earlier.

Estimates of the 43 economists in a Bloomberg survey ranged from deficits of $103 billion to $126 billion. The third-quarter shortfall was revised from a previously reported $110.3 billion.

Import Prices

Prices of goods imported into the U.S. rose less than forecast in February, reflecting the biggest drop in food costs in three years, another report today showed. The 0.4 percent gain in the import-price index follows little change in January, Labor Department figures showed today in Washington. Economists projected the gauge would increase 0.6 percent, according to the median forecast in a Bloomberg survey.

The gap represented 3.2 percent of GDP last quarter, compared with 2.8 percent in the third quarter.

The trade deficit, which accounted for most of the current- account gap, widened 4.7 percent to $141.1 billion in the fourth quarter, today’s report showed.

Rising oil costs are contributing to the shortfall. Crude oil futures on the New York Mercantile Exchange averaged $94.06 last quarter, up from $89.54 the prior three months.

January Deficit

More recent figures indicate the current-account balance may widen this quarter. The trade gap grew to $52.6 billion in January, the biggest deficit since October 2008, from $50.4 billion in December. Imports rose to a record in January, as did exports of autos and capital goods.

“For many products, demand has been above our ability to produce,” Mike DeWalt, director of investor relations at Caterpillar Inc. (CAT), the world’s biggest maker of trucks, said on a Jan. 26 conference call with analysts. “We have invested in Caterpillar factories in the United States and around the world to increase production.”

U.S. income on overseas assets fell by $5.7 billion to $180.7 billion in the fourth quarter, today’s report showed. Foreign earnings on U.S. assets, including wages and compensation, increased by $4.6 billion to $130.5 billion.

That left a $50.3 billion surplus on income payments, down from $60.6 billion surplus in the prior quarter. U.S. investments overseas generally yield more than the Treasury securities that foreign investors prefer to buy, helping maintain the income surplus.

Payments by the U.S. government to foreigners and other private transfers abroad exceeded inflows from overseas by $33.3 billion last quarter, compared with $33.5 billion in the previous period.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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